Guide to the US Trinidad & Tobago Tax Treaty

Understanding the US Trinidad & Tobago Tax Treaty is crucial for U.S. expats living in Trinidad and Tobago and to Trinidadian and Tobagonian residents who are non-US citizens with U.S. sourced income. This guide breaks down the treaty's provisions, offering clarity on how it affects personal taxation and helps avoid double taxation for individuals residing in Trinidad and Tobago and dealing with U.S. tax obligations.

Executive Summary

• ​The U.S. Trinidad and Tobago tax treaty offers mechanisms to prevent double taxation.

• The treaty includes a "Savings Clause" that maintains the US right to tax its citizens as per its domestic laws and not per the treaty with just limited exceptions.

• US-sourced passive income, such as interest, dividends, and pensions, may be taxed at reduced rates or exempted for Trinidadian and Tobagonian residents who are U.S. NRAs (non-resident aliens).

What is the U.S. Trinidadian and Tobagonian Tax Treaty?

The U.S. Trinidad and Tobago tax treaty, signed in 1970, serves as an agreement between the two countries for determining the taxation of income where both nations may have the legal right to tax according to their respective laws. The treaty covers, among many topics, avoidance of double taxation, residency tie-breakers and taxation of various forms of income, including business profits, dividends, interest, pensions, and capital gains. This article will focus on some of the key aspects of the treaty that hold particular significance.

Relief of Double Taxation

The Trinidad and Tobago U.S. tax treaty provides mechanisms for relief from double taxation, ensuring that income earned in one country by residents or citizens of the other is not taxed twice. To avoid double taxation, the treaty allows U.S. expats to claim a foreign tax credit for the income tax they pay on Trinidadian and Tobagonian sourced income to Trinidad and Tobago against their U.S. tax liability. Conversely, Trinidad and Tobago offers a credit for U.S. taxes paid on U.S. sourced income against its own tax liabilities.

Example

Kareem Ali, a U.S. citizen living in Port of Spain, Trinidad and Tobago, earns an annual salary of $80,000 and pays $25,000 in taxes to Trinidad and Tobago for the year. Kareem's U.S. tax liability for this income amounts to $22,000. Thanks to the relief of double taxation provision of the tax treaty, he is entitled to claim a foreign tax credit on his US taxes. Kareem applies the $25,000 he paid in Trinidadian and Tobagonian taxes against his U.S. tax obligation, effectively reducing his U.S. tax liability to zero and even generating a $3,000 credit surplus, which may be carried over to subsequent tax years.

What is the Savings Clause?

The Trinidad and Tobago U.S. tax treaty contains a "savings clause" which preserves the right of the U.S. to impose taxes on its citizens according to its own laws, even if this contradicts the provisions of the treaty. As a result of this clause, the majority of the benefits and reductions offered by the treaty do not apply to U.S. citizens living in Trinidad and Tobago.

Example

Keisha Williams, a U.S. expat, resides in Port of Spain, Trinidad and Tobago, and works for an American bio-tech company. She performs all her work duties in Trinidad and Tobago and has no physical presence in the U.S. Although the Trinidad & Tobago U.S. tax treaty exempts such income from U.S. taxation on the basis that there is no permanent establishment in the U.S., the savings clause overrides this, requiring Keisha to declare and possibly pay U.S. taxes on her income. Nevertheless, Keisha can take advantage of the foreign earned income exclusion or foreign tax credits for the taxes paid in Trinidad and Tobago to avoid being taxed twice on the same income.

​Expert Tip: It's crucial for U.S. citizens to familiarize themselves with the savings clause exclusions in the tax treaty to accurately determine which tax benefits they can utilize.

Taxation of US-Sourced Passive Income

Passive income from U.S. sources, which is not tied to a U.S. trade or business, is generally taxed at a flat rate of 30% if earned by a non-resident alien. However, the US Trinidad and Tobago tax treaty lowers this rate and in some cases totally exempts it from US taxation for certain types of income. We've summarized some of the tax treaty rates in the table below. It's important to note that that these rates generally do not apply to U.S. citizens due to the savings clause mentioned earlier.

	Tax Rate	Treat Article Citation
​Interest	30%	13
​Dividends - Paid by U.S. Corporations	30%	12(1)
Dividends - Qualifying for Direct Dividend Rate	30%	12(1)
Pensions and Annuities	0%*	22(1)
Social Security	30%**	None

*The rate applies to both periodic and lump-sum payments.

**Tax rate applies to 85% of the social security payments.

Income Earned While Temporarily Present in the US

Generally, income earned from work performed in the US would be considered US source income and would be subject to US taxation. However, the U.S. Trinidad and Tobago tax treaty lists certain exemptions where such income is not subject to US taxes. It's important to note that these exceptions generally do not apply to U.S. expats because of the savings clause mentioned earlier. We've summarized some of these exceptions in the table below:

	Maximum Presence in U.S	Required Employer or Payer	Maximum Amount of Compensation	Treaty Article Citation
Employee	183 days	Any foreign resident	No limit*	17
Contractor	183 days	Any foreign resident contractor	No limit	17
Public entertainment	No limit	Any U.S. or foreign resident	$100/day	17(4)
Teaching	2 years	U.S. educational institution or U.S. Government	No limit**	18
Scholarship or fellowship grant	5 years	Any U.S. or foreign resident	No limit	19(1)
Studying and training - Remittances or allowances	5 years	Any foreign resident	No limit	19(1)

*Does not apply to fees paid to a director of a U.S. corporation.

**Does not apply to compensation for research work primarily for private benefit.

Are Self-Employed U.S. Expats in Trinidad and Tobago Subject to U.S. Social Security Taxes?

Self-employed U.S. expats in Trinidad and Tobago are subject to U.S. Social Security taxes, in addition to their obligations to the Trinidadian and Tobagonian social security system. This is due to the absence of a totalization agreement between Trinidad and Tobago and the United States, which would otherwise prevent the double taxation of social security in such situations.

State Taxes and Tax Treaties

Numerous states within the United States impose income taxes on their residents. The adherence to the Trinidad and Tobago U.S. tax treaty varies by state, some may recognize them, while others may not.

​Expert Insight: Always check with a tax professional about how state tax laws interact with the treaty, as this can vary significantly from state to state.

Need Help Navigating the US Trinidad and Tobago Tax Treaty?

At CPAs for Expats, we specialize in helping US expats stay compliant with their US taxes. Our low fees and 4.9/5 rating on independent review platforms attests to our commitment to excellence and client satisfaction. Contact us today, and let our tax experts simplify your life and taxes.

Contact Us for U.S. Tax Filing Assistance

Frequently Asked Questions

Does Trinidad and Tobago have a tax treaty with the US?

Does Trinidad and Tobago have a totalization agreement with the US?

Do Trinidadian and Tobagonian citizens pay tax on US capital gains?

Article by Lewis Grunfeld, CPA

Lewis is a seasoned expert in international and U.S. expatriate taxation. With over 10 years of international tax experience, he specializes in applying tax treaties to benefit expats, handling complex tax scenarios and ensuring significant tax savings for his clients. Lewis's expertise in international compliance and U.S. expat tax returns has made him a trusted advisor in the expatriate community.